Objectives On completion of this tutorial, you will be able to:

• Recognize the role of funds transfer pricing (FTP) in the management of interest rate risk
• Identify the importance of limit setting and monitoring in ensuring that interest rate risk remains within appetite
• Recognize how a matching strategy can be used to reduce interest rate risk and the difficulties in adopting such a strategy in practice
• Identify the different types of derivative that can be used to mitigate interest rate risk
• Recognize some of the difficulties associated with managing interest rate risk, especially in a low interest rate environment

Tutorial Overview Interest rate risk is a phenomenon that is integral to the nature of banking. It is not always desirable to eliminate this risk, even if it is possible to do so, because banks would be denying themselves opportunities and hampering their ability to handle customer business profitably. But it is important to manage it. This tutorial looks at the various approaches that banks take to interest rate risk management. Prerequisite Knowledge Interest Rate Risk - Management Tutorial Level: Intermediate Tutorial Duration: 60 minutes